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The Salween Timber and Construction Company (India) Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 73D of 1962
Judge
Reported in4(1968)DLT93
ActsArbitration Act, 1940 - Sections 30
AppellantThe Salween Timber and Construction Company (India)
RespondentUnion of India
Advocates: B.N. Sen,; S.N. Marwah,; A.K. Nag,;
Cases ReferredUnion of India v. Bakshi Ram
Excerpt:
the appellant company had entered into the contract with the union of india in order to supply the indian teak wood logs - it was alleged that there was a breach of contract and as a result the contract was cancelled - in this view, the disputes were referred for the arbitration and for this, each party had appointed a separate arbitrator - it was found that as there was a disagreement between the arbitrators, thereforee, the disputes were referred to the umpire to make the award - later, the union of india raised the objections and the award was vitiated on the ground of error apparent on the face of award - the objections were controverter by the appellant - hence, the umpire should set the criterion for the assessment toherwise the award would become intelligible - thus, the objection.....tatachari, j.(1) this appeal, f. a. o. 73-d 1962, originally came up forbearing before a n. grover, j. the learned judge considered that the appeal should be heard and disposed of by a division bench, and by his order dated 24th march, 1964, directed the matter to be placed before the hon'ble chief justice for orders regarding the constitution of a bench turn deciding the appeal. accordingly, the appeal has been posted before us for hearing.(2) this appeal has been filed by m/s salween timber and construction co. and antoher against the judgment of shri n. c. gupta, sub-judge 1st class, delhi, dated 12th april, 1962, in suit no. 44 of 1961, whereby he set aside the award given by the umpire on 20th november, 1960, by which the umpire allowed a claim of the appellants here into the extent.....
Judgment:

Tatachari, J.

(1) This Appeal, F. A. O. 73-D 1962, originally came up forbearing before A N. Grover, J. The learned Judge considered that the appeal should be heard and disposed of by a Division Bench, and by his order dated 24th March, 1964, directed the matter to be placed before the Hon'ble Chief Justice for orders regarding the constitution of a Bench turn deciding the appeal. Accordingly, the appeal has been posted before us for hearing.

(2) This Appeal has been filed by M/s Salween Timber and Construction Co. and antoher against the judgment of Shri N. C. Gupta, Sub-Judge 1st Class, Delhi, dated 12th April, 1962, in suit No. 44 of 1961, whereby he set aside the award given by the Umpire on 20th November, 1960, by which the Umpire allowed a claim of the appellants here into the extent of Rs. 3,10,000.00 and also awarded a sum of Rs. 6,500.00 towards costs. The Umpire, by the said award, rejected the counter-claim of the respondent Union of India.

(3) The facts which have given rise to the present appeal may be briefly stated. The first appellant-company entered into a contract. evidenced by A/T No. S.T. 11/21684/D/1868/3-R, dated 26th December, 1953, with the Union of India, agreeing to supply 1,94,750 oft. of Indian Teakwood Logs at Rs 8/12.00 per cft. to the Union of India. According to the terms of the contract, 48,650 cft. were to be delivered by 18th January, 1954, and 1,46,100 oft. by 1st April, 1954. Further, under the terms and conditions of the contract, the logs tendered by the first appellant-company had to be inspected by an authority on behalf of the Union of India before the acceptance of the tender.

(4) It appears that the delivery period for the supply of the timber was extended from time to time to 31-10-1965. Once again, the delivery period was extended io 20-6-1956. At that time, the balance quantity yet to be supplied by the first appellant-company was about 79,474.50 cft. The first appellant -company alleged that they tendered on 11-1-1956 for inspection 1,700 tons=85,000 cft. at their Shalimar (Calcutta) Depto. According to them, out of the said quantity, about 861 tons== 43,058.52 eft of timber was nto inspected at all within the extended delivery period and, thereforee, they treated the said failure to inspect within the delivery period as a breach of the contract on the part of the Union of India. But, their further case was that, later on, on certain assurances given by the Union of India, they agreed to supply the balance quantity by 15-4-1957, to which date the delivery period was extended on 6-10-1956. Their further case was that on 14-2-1957, they tendered 46,000 oft.==about 920 tons for inspection, out of which 4,966 oft. only were inspected and the balance quantity of 41,033 23 cft.=about 820 tons remained uninspected up to 15-8-1957.

(5) Thus, according to the first appellant-company, they tendered the requisite quantity of logs for inspection by the relevant dates, but that the respondent-Government failed to have the timber inspected within the delivery periods and thus committed a breach of the contract. On the toher hand, the respondent-Government alleged that the first appellant-company failed to supply the timber within the delivery periods in accordance with the terms of the contract. They further alleged that the timber actually tendered for inspection was invariably inspected on the different occasions in time. that it was the first appellant-company that committed a breach of the contract, and that, thereforee, the Government cancelled the contract on 4.9.1957 for the then outstanding quantity of about 42,185 oft.==about 843.7 tons.

(6) Thus, the first appellant-company, who alleged that the respondent-Government committed a breach, claimed Rs. 4,00,000 as damages. On the toher hand, the Union of India, who alleged that the breach was committed by the first appellant cumpany, claimed that they had to purchase the balance quantity of timber at the risk of the first appellant-company, and in doing so, it had to suffer a loss of Rs. 3,38,525.75 on account of the higher prices that had to be paid by them. The respondent-Government, thereforee, claimed the said amount of Rs. 3,38.525.75 as damages from the first appellant-company. They also claimed liquidated damages.

(7) In that manner, adispute arose between the parties regarding the contract in question; and the same was referred to arbitration in pursuance of an arbitration Clause in the contract. According to the said Arbitration Clause, each party was to appoint one Arbitrator. Accordingly, the first appellant-company appointed one Shri Tek Chand Vij as their Arbitrator, while the respondent-Government appointed Shri H.C. Daga, as their Arbitrator and the matter was referred to the said Arbitrators However, on 5-9-1958, the two aforesaid Arbitrators disagreed between themselves, and they referred the case to an Umpire, Shri Anand Behari Lal.

(8) Before the Umpire, the counsel for the parties appear to have agreed that the following issues might be framed to cover the points in dispute between the parties and which had to be determined by the Umpire. The issues thus framed on 9-1-1959 were as follows :-

'1. Whether the claimant company committed breach of the contract If so, on what date Was the Government nto justified in cancelling the balance quantity of contract 2. Whether the Government is entitled to any damages If so, how much 3. Whether the Government is entitled to any liquidated damages If so, how much 4. Whether 1,700 tons were tendered for inspection by the claimants on 11-1-1956? If so, were the same duly inspected by 29-6-56 and inspection ntoes issued If nto with what effect 5. Whether 920 tons were tendered for inspection by the claimants on 14-2-57 If so. were the same inspected by 15-4-57 and even thereafter up to 15-8-57 and inspection ntoes issued If nto, to what effect 6. To what damages, if any, is the company entitled to on uninspected quantity mentioned under issues 4 and 5 7. Whether the Government was bound to extend the D. P. as alleged by the claimants If so, what is the effect of the Government nto extending the Delivery period between 21-6-56 and 6-10-56 8. whether the claimant is entitled to any damages for the periord referred to in issue No. 7 9. Relief.'

(9) The Umpire made his award on 20-11-1960. In his award, after setting out the facts and the issues, the Umpire recorded his findings on the issues as under : -

'HAVINGgiven my best consideration to the matters in dispute, record below my findings on the issues mentioned above. 1. The claimant company did nto comit any breach of contract in this case and the issue is decided against the respondent. 2. In view of the finding on issue No. 1, the Respondent 1s nto entitled to recover any damages from the claimant and the issue is decided accordingly against the respondent. 3. The Government is nto entitled to recover any liquidated damages from the claiment. 4. It is proved that the claimants did actually tender at their Shalimar Depto, Calcutta 1,700 tons of Indian teak wood logs for inspection under challan dated 11-1-56 and I hold and decide accordingly. I further hold and decide that out of this 43058.52 eft. still lay on the spto uninspected on behalf of the respondent up to 20-6-56 i.e. the end of the then delivery period. 5. It is proved that the claimants did actually tender at their Shalimar depto 920 tons (46000 oft.) of Indian teak wood logs for inspection under challan dated 14th February, 1957, and I hold and decide accordingly. It is further proved that out of this 41033.23 oft. of timber which was lying at the claimants' Shalimar depto was nto inspected even up to 15th August, 1957, and hence no inspection ntoes in respect of uninspected quantity were or could be issued. This default in inspection was due to laches on behalf of the respondents relevant men in charge of arranging and carrying out inspections. The belated allegation of the respondent that this challan was cancelled or withdran by the claimants, for the first time made after the claimants had even produced and closed their evidence is nto worthy of credit and has nto been substantiated by any reliable evidence. I do nto accept it. 6. On this issue my finding is that that the claimants are entitled to recover Rs. 3,10,000 as damages from the respondent. 7. This issue is decided against the respondent. 8. The claimants are nto entitled to any damages under this issue. Issue No. 9. In view of the above findings the respondent Union of India, is nto entitled to any damages and its claim is to be rejected. The claimants are entitled to get Rs. 3,10,000 only as damages from the respondent. The claimants should further be allowed Rs. 6,500 (Rupees six thousand five hundred) as their costs in these proceedings'.

(10) Thus, the Arbitrator held that the breach was committed by the Union Government and rejected their claim for damages as well as for liquidated damages. He awarded Rs. 3,10,000 as damages to the first appellant-company, and also a sum of Rs. 6,500 towards their costs in the proceedings.

(11) Then, the appellant-company and antoher, the Hong kong Shanghai Corporation (as assignee of the award from the appellant-company), filed an application in the Court of the Subordinate Judge 1st Class, Delhi under Sections 14 and 17 of the Indian Arbitration Act praying that a ntoice be issued to the Umpire to file the award into the Court, that the award be made a rule of the Court with costs of the Court proceedings and future interest at 6% under Section 29 of the Indian Arbitration Act, and that the decree be passed in favor of the second appellant, being the party absolutely entitled to the amount as an assignee of the award from the first appellant herein, and if, for any reason, the same is held to be nto permissible, then the decree be passed in favor of the first appellant. The said application was numbered as suit No. 44 of 1961.

(12) The Union of India filed their objections on 14-3-1961 by way of a petition under Sections 30 and 33 of the Indian Arbitration Act against the said award. They pleaded that the award of the Umpire was liable to be set aside on the grounds, inter aha, that there was substantial miscarriage of justice, that the breach of the contract, if any, on the part of the Government was waived by the company, that damages could nto be awarded under issues Nos. 4 and 5 in favor of the company, that the award was vitiated by an error of law apparent on the face of the award, that the award was vague and indefinite, that the Umpire failed to consider the evidence adduced on behalf of the Government in respect of their claim for damages, that the award was contrary to the documentary evidence on the record, that the Umpire ought to have awarded the damages claimed by the Government, and that the award should be set aside for the various grounds mentioned by them.

(13) To these objections, the appellants filed their reply in which they controverter the various allegations in the objections filed by the Government. The appellants also pleaded by way of a preliminary objection that the various allegations made in the objection petition were irrelevant and cannto be considered by the Court, that even the arbitration-record, including the oral and documentary evidence, cannto be looked into. save to the extent to which there is any reference to it in the Award itself, that most of the pleas of the Government relate to the merits which cannto be gone into and adjudicated upon by the Civil Court, that there was no error of law apparent on the face of the award, and that, thereforee, a decree may be passed in terms of the award.

(14) On the aforesaid pleadings of the parties, the following issues were framed by the trial Court :-

'1.Whet ther the award is liable to be set aside as per grounds in paras Nos. 17 to 22 of the objection petition O. P. O. Ntoe : This issue will also include whether the said grounds exist in fact? 2. Whether the award has been assigned to petitioner No. 2 If so, when and to what effect O. P. 3. Relief. Additional Issue : Whether the various disputes decided by the present award were specifically referred for decision as alleged in the preliminary para 2 of the reply filed by the petitioner If so, to what effect O. P. A.'

(15) Dealing with the issue No. 1, the learned Subordinate Judge pointed out that the ground stated by the respondent-Government in paragraph 17 of their objections was that in fact the prices of timber had considerably risen in September, 1957, and the Umpire illegally held that the breach was on the part of the Government, and thus the amount of Rs. 3,10,000.00 awarded to the appellants proceeded on an illegal basis ; that the ground stated in para 18 of the objections was that the first appellant-company did nto suffer any damages at all, and yet the Umpire awarded them a sum of Rs. 3,10,000.00; that in paragraphs 19 and 20 of the said objections the grounds were of a similar nature ; and that in para 21 (i) to 21 (iv), the grounds were that the award was improperly procured, fraudulent, partial and unjust, etc. The learned Subordinate Judge, after referring to the said grounds, referred to the decisions in Union of India vs. M/s Shambhu Dayal Piari Kishan and Harbans Singh v. Punjab State, wherein it was laid down that an Arbitrator is competent to decide buth questions of law and fact when they are referred to him, that where the Arbitrator makes a mistake either in law or in fact in determining the matter referred to him, but such mistake does nto appear on the face of the award, the award is good ntowithstanding the mistake, and will nto be remitted or set aside. The learned Subordinate Judge then observed, that the points or grounds raised in paragraphs 17 to 20 were all on the merits of the case which lay within the exclusive jurisdiction of the Umpire, that it was nto for the Court to go into the question of merits and give independent findings, that the grounds contained in para 21 (i) to (iv) are too general and vague, and that the various points or grounds did nto fall within the jurisdiction of the Court which was hearing the objections against the award. He, thereforee, rejected the contentions based on the said grounds

(16) The learned Subordinate Judge then referred to the ground in paragraph 21 (v) of the objections wherein it was pleaded that there was an error apparent on the face of the award inasmuch as the Umpire allowed damages to the first appellant-company under issue No. 6 as a result of his findings buth under issue No. 4 and issue No. 5, which he could nto do. The contention before the learned Subordinate Judge on the basis of the said ground was that the Umpire found on issue No. 4 that the first appellant-company tendered 1,700 tons (85,000 cft.) of timber for inspection on 11-1-1956, and out of that quantity 43,058 cft. remained uninspected, and on issue No. 5 the Umpire found that the first appellant-company tendered 920 tons (46,000 cft.) of timber for inspection on 14-2-57, and out of that quantity 41,033.23 cft. remained uninspected, and that the Umpire in giving his finding on issue No. 6 took into consideration buth the quantities viz. 43058 cft. plus 46,000 cft. making a ttoal of about 89,000 cft., and awarded a lumpsum of Rs. 3,10,000.00, while only 42,185 cft. of timber was all that was due for supply and was nto supplied by the last date of the delivery period. In toher words, the argument was that the Umpire while awarding damages, instead of taking into consideration only the quantity which was due for supply and was nto supplied, took into consideration the entire quantity of about 89,000 cft. (43,058 cft. plus 46,000 cft.), which was found by him under issues 4 and 5 as nto inspected by the respondent-Government though tendered for inspection by the first appellant-company, and awarded damages with respect to the entire quantity, that this was contrary to the provisions in Section 56 of the Indian Sale of Goods Act and Section 73 of the Indian Contract Act, and that this was an apparent error of law on the face of the award. The learned Subordinate Judge accepted this contention and held, that the buyer i e. the Union of India did nto inspect the goods which were actually tendered and yet refused to accept the remaining quantity of goods due under the contract, that in view of the previous in Section 56 of the Indian Sale of Goods Act and Section 73 of the Indian Contract Act, the seller was only entitled by way of compensation to the amount by which the contract price exceeds that which can be obtained by the seller at the time of its re-sale in the market, that it the seller tenders for acceptance a large quantity of goods and it was nto accepted, the Government would nto be liable to pay damages by way of compensation for the whole of the quantity tendered for inspection, but would be liable only for the quantity which remained due under the contract The learned Subordinate Judge, thereforee, concluded that in the present case, the Umpire, in allowing the damages by way of compensation on the entire quantity which was tendered but nto accepted and which was far in excess of the quantity that actually remained due, committed an error of law apparent on the face of the award.

(17) Antoher contention before the learned Subordinate Judge was that the Umpire should have given an indication of the criterion on which he arrived at the sum of Rs. 3,10,000.00 which he awarded as damages. The learned Subordinate Judge agreed with that contention also, relying on the decision in Union of India v. Bakshi Ram, and held that though the Arbitrator or the Umpire was nto bound to give findings on all the issues and give reasons in support of his conclusions, yet 'the criterion for a particular decision involving an arithmetical decision is nto the same as reasons in support of findings', and that though ''the Arbitrator or the Umpire may nto be legally bound to give reasons for his award, yet where figure work was involved, the Arbitrator or the Umpire must give the criterion for the assessment', as 'toherwise the award may nto be intelligible in the absence of any such criterion'. The learned Subordinate Judge, however, rejected the further contention on behalf of the respondent-Government that the first appellant-company waived the breach, if any, on the part of the Government, and also some toher contentions, on the ground that they all related to the merits of the case which the Court had no jurisdiction to consider.

(18) In view of his findings that the Umpire failed to give the breakup or the criterion for the amount awarded as damages, and that there was an error of law apparent on the face of the award, the learned Subordinate Judge held on issue No. 1 that the award was liable to be set aside.

(19) On issue No. 2, the learned Subordinate Judge held that the award was assigned to the 2nd appellant herein (2nd petitioner in the lower Court). On the additional issue, the learned Subordinate Judge held that in the instant case there was no specific question of law which was referred to the Arbitrator for his decision.

(20) In the result, in view of his finding on issue No. 1, on 12th April, 1962, allowed the objection petition of the Union Government, and set aside the award dated 20-11-1960, and dismissed the application filed by the appellant-company under Sections 14 and 17 of the Indian Arbitration Act.

(21) As already stated, it was against that judgment that this appeal, F.A.O. 73-D of 1962, was filed by the appellant-company in the High Court of Punjab. The said appeal originally came up for hearing, as already stated, before A. N. Grover, J.

(22) Before the learned Judge, it was contended on behalf of the appellant-company.

(I)that the learned Subordinate Judge erred in taking the view that the Umpire, while awarding damages, could nto take into consideration the ttoal quantity which was offered for inspection and which was nearly double the quantity that actually remained to be supplied ; (ii) that the learned Subordinate Judge erred in placing reliance on Section 56 of the Indian Sale of Goods Act and holding that although the respondent-Government did nto inspect the goods in question and thus refused to perform its part of the contract by nto accepting the remaining quantity of the goods due, the seller (first appellant- company) was entitled by way of compensation only to the amount by which the contract price exceeded that which could be obtained by the seller for the quantity that remained due by its re-sale in the market; (iii) that up to 20th June, 1656,43058.52 cft. though offered for inspection, remained untinspected. and thereafter on 14th February, 1157, antoher quantity of 46,000 cft. was offered for inspection, out of which 41,033.23 cft. remained un-inspected till 15-8-1957; that in that manner the ttoal quantity offered for inspection was about 85,000 cft. but the same was nto inspected for a long time; that though the first appellant-company was bound to supply only 42,185 cft. they had to offer 46,000 cft. for inspection on 14th February, 1957, because the first lto of 43,058.52 cft. which was lying for inspection since 11th January, 1956. had deteriorated on account of long storage which, on being sold on 2nd September, 1957 fetched only Rs. 62000.00 that similarly with regard to the second lto of 41,000 cft. which remained un-inspected up to 15th August, 1957, its market value was nto more than Rs. 44.000.00; and that the case of the first appellant-company was that apart from the expenses incurred on account of insurance, handling, interest on bank over-draft, rent, watch and ward expenses, etc. on buth the ltos, the damages suffered by the first appellant-company came to Rs. 4,00,444.00 on account of the first lto and 4,00,400.00 in respect of the second lto, but the claim was confined only to Rs. 4,00,000.00 in all ; (iv) that even though the quantity which remained to be supplied was 42,185 cft., the loss mentioned above resulted to the first appellant-company owing to the default on the part of the Inspectorate Department of the respondent Government to inspect the timber, and that it was the entire loss thus incurred which was covered by issues 4 and 5 framed by the Umpire, and if an amount of Rs. 3,10.000.00 had been awarded as damages under buth the issues, it could nto possibly be said that the Umpire had committed any error of an apperent nature; (v) that it is well-settled that the Umpire need nto give all the details of the calculation or the manner in which the damages were worked out; (vi) that the learned Subordinate Judge was nto right in holding that damages could be awarded only under Section 56 of the Sale of Goods Act or Section 73 of the Indian Contract Act ; and (vii) that under Section 55 of the Indian Contract Act, if it was nto the intention of the parties that time should be of the essence of the contract, the contract does nto become voidable by the failure to do such a thing at or before the specified time, but the promiseis entitled to compensation from the promisor for any loss occasioned to him by such failure ; that it is further provided in the same section that if, in the case of a contract which is voidable on account of the promisor's failure to perform his promise at the time agreed, the promiseaccepts performance of such a promise at any time toher than that agreed, the promisecannto claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives ntoice to the promisor of his intention to do so; and that in the present case Exhibits C/7 and C.W. 6/3 show that the first appellant-company made it clear that their legal rights would nto be prejudiced by the agreement to extend the date of delivery and, thereforee, it was open to the appellant-company to ask for compensation for the loss occasioned by the non-performance of the promise on the part of the respondent- Government to inspect the goods within the extended time.

(23) On the toher hand, the contentions on behalf of the respondent-Government were : -

(I)that the case of the first appellant-company before the Umpire was nto founded on Section 55 of the Contract Act; and that it was clear from Exhibit C/3 dated 15th April, 1957, that the final extension which was sought by the first appellant company was wholly unqualified and unconditional ; (ii) that, according to the decision of Bishan Narain, J., in Union of India v. Bakshi Ram. If a lump-sum is awarded in respect of all the items in dispute instead of awarding separate amounts in respect of each item, and it appears on the face of the award or is proved by extrinsic evidence that in arriving at the lump-sum some matters were taken into account which the Arbitrator had no jurisdiction to consider, the award is vitiated and is liable to be set aside ; and (iii) that it was nto clear on what basis the Umpire arrived at the amount of Rs. 3,10,000.00 which he awarded towards damages, as he did nto specify the break-up of the said amount, and that it is open to the Court to ascertain how and for what reasons the lump-sum was arrived at by examining the evidence adduced, even if the breakup or the reasons were nto expressly stated in the award, as held in Union of India v. Bakshi Ram;

(24) In answer to this last contention on behalf of the respondent it was submitted on behalf of the appellants :-

(I)that it is well-settled in the law of Arbitration that when a lump-sum has been awarded, it should be taken to reflect the net result of the claim upheld or disallowed, and it is nto necessary that each item of claim or counter-claim should be specifically dealt with as held in the Union of India v. Mangal Dass M. Verma, and Rashbehari Sen v. Anand Swarup Bhargava, and (ii) that the learned Subordinate Judge proceeded on the wrong assumption that the only method of assessing damages is to find out the difference between the contract price and the market price; that it is only one of the tests and nto the only test or criterion as held in Fateh Chand-Murlidar v. Judilal Kamalpet ; that the trial Court completely misunderstood the basis on which the claim for damages was made in the pleadings by the appellants ; and that the damages were claimed and could be claimed nto merely for the loss sustained on account of non-acceptance of the balance of the goods, but also with regard to the loss and damage incurred in respect of the entire quantity which was made available for inspection but was never inspected and which completely deteriorated in value owing to the default on the part of the Inspectorate Department of the respondent-Government. 25. After referring to the above contentions of the parties, the learned Judge (A.N. Grover, J.) observed in his order, dated 24-8-1964, 'There appears to be some force in these submissions of Mr. Chatterjee (on behalf of the appellants), and if it is nto open to try to find out in the way Bishan Narain, J. did in Bakshi Ram's case whether the lump-sum awarded could possibly have been awarded, then it is difficult to see how the award could be set aside. The observations made in the toher cases, referred to before, seem to indicate that the course adopted by Bishan Narain, j. was nto justified. As it would nto be proper for me sitting singly to differ from a learned single Judge on a point of this nature, I am of the opinion that this appeal should be held and disposed of by a Bench. thereforee, I direct that the orders of my Lord the Chief Justice may be obtained for constituting a Bench for deciding the appeal'.

(26) The appeal has thus come up for hearing before us. The contentions of Mr. B. Sen, learned counsel for the appellants are :-

(I)that the learned Subordinate Judge erred in holding that there was an apparent error of law on the face of the award ; and (ii) that the learned Subordinate Judge erred in relying on the decision in Union of India v. Bakshi Ram, and proceeding to find out the break-up of the lump-sum damages awarded by the Umpire, even though the Umpire did nto specify the basis or the criterion on which he fixed the amount of damages.

(27) The two contentions appear to us to be somewhat over-lapping. As regards the first contention, as already pointed out, the Umpire held that in view of section 56 of the Sale of Goods Act and Section 73 of the Indian Contract Act, the appellants were entitled by way of compensation only to the amount by which the contract price exceeded that which can be obtained by them at the time of re-sale of the goods that remained due in the market, and that the Umpire in allowing damages by way of compensation on the whole quantity of timber tendered by the appellants but nto inspected and accepted by the respondent-Government which was far in excess of the quantity that remained due, committed an error of law apparent on the face of the award. It has, thereforee, to be considered whether the award was vitiated by an error of law apparent on the face of the award, as held by the lower Court.

(28) Section 30 of the Indian Arbitration Act, 1940 (Act X of 1940). lays down the grounds for setting aside an award as follows :-

'30.Grounds for setting aside award :- An award shall nto be set aside except on one or more of the following grounds, namely :- (a) that an Arbitrator or umpire has misconducted himself or the proceedings ; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedinges have become invalid under section 35 ; (c) that an award has been improperly procured or is toherwise invalid'.

(29) It is now well-settled that an award may be set aside by the Court on the ground of an error of law apparent on the face of the award under the last part of Section 30(c) of the Arbitration Act. In Champsasey Bhara Company v. Jivraj Baloo Spinning and Weaving Company Ltd.'. the privy Council observed as follows :-

'THElaw on the subject has never been more clearly stated than by Williams, J. in the case of Hodgkinson v. Fernie. The law has for many years been settled, and remains so at this day that, where a cause or matters in difference are referred to an arbitrator, a lawyer or a layman, he is constituted the sole and final judge of all questions buth of law and of fact......The only exceptions to that rule are cases where the award is the result of corruption or fraud, and one toher, which though it is to be regretted is now, I think firmly established, viz., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established '

(30) This view has been adhered to in many subsequent cases, and in particular in the House of Lord in British westinghouse Company v. Underground Electrical Railways Company'.

(31) At page 331 (p. 69 in the A. I. R. Report), the Privy Council further observed as follows :-

'NOWthe regret expressed by Williams, J. in Hodgkinson v. Fernie has been repeated by more than one learned Judge, and it is certainly nto to be desired that the exception should be in any way extended. An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a ntoe appended by the arbitrator staling the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does nto mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound'.

(32) In Jivarajbhai Ujamshil Sheth an tohers v. Chintamanrao Balaji' the Supreme Court observed :-

'ANaward made by an arbitrator is conclusive as a judgment between the parties and the Court is entitled to set aside an award if the arbitrator has misconducted himself in the proceedings or when the award has been made after the issue of an order by the Court suspending the arbitration or after arbitration proceedings have become invalid under s. 35 of the Arbitration Act or where an award has been improperly procured or is toherwise invalid : s. 30 of the Arbitration Act. An award may be set aside by the Court on the ground of error on the face of the award, but an award is nto invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion'.

After referring to the observations of the Privy Council in 50 1. A. 324 at page 331 extracted above, the Supreme Court made the following observations at page 494 :-

'THECourt in dealing with an application to set aside an award has nto to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in s. 30. It is nto open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbit rator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannto proceed to determine whether the conclusion is right or wrong. It is nto open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is nto disclosed by the terms of his award'. Thus, an award may be set aside by the Court on the ground of an error of law on the face of the award. If the Umpire expressly states some reasons or grounds for his conclusion, and an error is patently found in the reasons or grounds so stated, it would be an error on the face of the award. But, if the Umpire merely states his conclusion without expressly stating any reasons or grounds thereforee, the fact that the Umpire did nto give any reasons in his award cannto by itself vitiate the award, nor can the validity of the award be impugned on the ground that each item of claim or counter-claim was nto specifically dealt with and the Umpire's decision thereon recorded, as pointed out in Shanta Sila Devi v. Dhirendra Nath Sen, Union of India v. Mangal Das N. Verma, at p. 300 and Rashbehari Sen v. Anand Sarup Bhargava. The said propositions were again reiterated in the unreported decision of the Supreme Court in Madan Lal Roshanlal Mahajan v. Hukamchand Mills Ltd, dated 19th August, 1966, in Civil Appeal No. 878 of 1964 and Bungo Steel Furniture (P) Ltd. v. Union of India, dated 30th September, 1966, in Civil Appeals Nos. 754 and 755 of 1964. In the last mentioned decision of the Supreme Court in Bungo Steel Furniture (P) Ltd v. Union of India, there was no doubt a difference of opinion between Ramaswami, J. on the one hand and Bhargava and Raghubar Dayal JJ. on the toher. All the learned Judges, however, agreed as regards the principle referred to above, but only differed as regards the question as to whether in that particular case, the Arbitrator expressly stated the reasons for his estimate of the damages claimed by the appellant therein for the breach of the contract.

(33) Further, it is nto open to the Court to speculate or to go into the evidence and try to find out as to what impelled the Umpire to arrive at his conclusion, or to attempt to probe the mental process by which the Arbitrator reached his conclusion, as pointed out by the Supreme Court in Jivarajbhoi v. Chintamanrao referred to above. This principle also was reiterated in the un-reported decision of the Supreme Court in Union of India v. Bango Steel Furniture (P) Ltd. dated 14th September, 1966, in Civil Appeals Nos. 373 and 543 of 1965, wherein it was observed as follows :-

'IT is well settled that the Court has no jurisdication to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out whether or nto the Arbitrator has committed an error of law, and that the award of the Arbitrator can be set aside on the ground of error of law on the face of the award only when in the award or in a document incorporated with it, as for instance a ntoe appended by arbitrator stating the reasons for his decision, there is found some legal proposition which is the basis of the award which is erroneous.'

(34) In the present case, as already pointed out, the Umpir just recorded his findings on each of the issues. On issues Nos. 1 to 5, his find- ings were against the respodent-Government. On issue No. 6, he merely stated his finding that the appellants herein (claiments) were entitled to recover Rs. 3, 10, 000.00 as damages from the respondent. He did nto state the reasons or the grounds or the basis on which he arrived at the amount of Rs. 3, 10, 000.00. what he did was in accordance with the law as laid down in the various decisions referred to above.

(35) The learned Subordinate Judge, after referring to the findings of the Umpire, expressed his views as follows :-

'IT is quite apparent from the perusal of the above findings that the umpire while awarding damages took into consideration nto only the quantity which was due for supply and was nto supplied, but he awarded damages with respect to all the quantity which was found by him as nto inspected though tendered for inspection, and this in law he could nto do under section 56 of the Indian Sale of Goods Act. It lays down that where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. Obviously the damages can be awarded for the goods which were to be supplied and wrongfully refused and nto accepted by the buyer. The principle of assessment of damages has been laid down under section 73 of the Indian Contract Act. It lays down that when a contract has been broken, the party which suffers from such breach is entitled to receive from the party who has broken the contract compensation for any loss or damage which naturally arose in the usual course of things from such breach or which the parties knew when they made the contract, to be likely to result from breach of it. It also provides that such a compensation is nto to be given for any remtoe or indirect loss or damage sustained by the reason of the breach. A number of illustrations have been given under section 73 of the Indian Contract Act. Illustration 'C' broadly resembles the facts of this case regarding law point involved. It reads as under :- 'A contracts to buy of B, at a stated price 50 maunds rice, no time being fixed for delivery. A afterwards informs B that he will nto accept the rice if tendered to him. B is entitled to receive from A, by way of compensation the amount, if any, by which the contract price exceeds that which B can obtain for the rice at the time when A informs B that he will nto accept it'.

In the instant case, the buyer i. e. Union of India did nto inspect the goods in question and in toher words refused to perform their own part of the contract i e. accept the remaining quantity of goods due under the contract at the agreed rate. , The seller is only entitled by way of compensation to the amount by which the contract price exceeds that which can be obtained by the seller at the time of its resale in the market. Naturally, if the seller so tenders for acceptance a large quantity of goods and it is nto accepted, the Government is nto liable to pay damages by way of compensation for the whole of the quantity tendered for inspection. It is only with respect to a quantity which remained due under the contract. The Umpire in this case having allowed the damages by way of compensation on the whole quantity tendered but nto accepted, which is far in excess of the quantity remaining due, has committed an error of law apparent on the face of the award. It is clear from perusal of paras 4 and 5 of the award reproduced above that the Umpire has allowed damages with respect to a ttoal quantit/ of 43,058.52 cft. plus 41,033.23 =84,091.75 cft. and thereby committed a legal error which is apparent on the face of the award. No doubt there is also a plea in the objections that the breach, if any, on the part of the respondent had been waived by claimant No. 1. However, I am nto to go into the plea of waiver because that is a matter relating to merits of the case and the plea must be deemed to have been considered by the Umpire. But, toherwise, the award is nto sustainable because the Umpire could nto award damages on the quantity tendered for inspection twice and nto inspected'.

(36) In our opinion, the learned Subordinate Judge took a wrong view about the finding of the Umpire. In the first place, it cannto be said to be 'apparent' from the findings of the Umpire that he fixed the damages at Rs. 3,10,000.00 by taking into consideration the entire quantity which was tendered for inspection but was nto inspected. It is true that the Umpire gave his finding on issue No. 4 that a quantity of 1700 tonsabout 85,000 cft. was tendered on 11-1-1956 for inspection, out of which about 43,058.52 cft. remained un-inspected, and also gave his finding on issue No. 5 that a quantity of 920 tons=46000 cft. was tendered on 14-2-1957, out of which about 41,033.23 cft. remained un-inspected. It is also true that issue No. 6 was worded as 'to what damages, if any, is the Company entitled to on un-inspected quantity mentioned under issues 4 and 5 ?', and the Umpire recorded his finding as 'on this issue my finding is that the claimants are entitled to recover Rs. 3,10,000.00 as damages from the respondent. But, can it be said to be apparent from this that the Umpire took into consideration the entire uninspected quantity of about 43,058.52 plus 4,033.23=84,091.75 eft. in fixing the damages at Rs. 3,10,000.00? In our opinion, it cannto be said to be 'apparent'. At the most, it can perhaps be said that he might have taken the entire quantity into consideration. But, that is nto the same thing as saying that it is apparent.

(37) Futher, buth the issues Nos. 4 & 5 covered or included the 'effect' of the findings of non-inspection under the said issues, as the words 'if nto, with what effect' are used in the said issues. According to the case of the appellants before the Umpire, apart from the expenses incurred on account of insurance, handling, interest on bank overdraft, rent, watch & ward expenses, etc on the two quantities refered to in issues 4 and 5, the damages suffered by the appellants came to Rs. 4.00,444.00 on account of the first quantity and Rs. 4,00,400.00 in respect of the second quantity, but that they confined their claim only to Rs. 4,00,000.00 in all. It might be that the Umpire had also in his view the expenses for watch and ward etc. alleged to have been incurred by the appellants by reason of the delay in inspection or noninspection of the timber during the relevant period by the respondent Government. It is also significant that the amount of Rs. 3,l0.000.00 fixed by the Umpire was less then each of the sums of Rs. 4,00,4447- and Rs. 4,00,400.00 alleged to be the damages suffered by the appellants in respect of each of the quantities referred to in issues 4 and 5. It is nto at all clear or definite whether, in fixing the sum of Rs. 3,10,000.00the Umpire took into consideration only one of the quantities or buth the quantities as well as the expenses for watch and ward etc. incurred by the appellants. It has to be surmised only. That is why, we consider that it cannto be said to be apparent from the findings of the Umpire that he took into consideration the entire un-inspected quantity of timber in fixing the amount of damages.

(38) In the second place, the reasoning of the learned Subordinate Judge based on Section 56 of the Indian Sale of Goods Act and Section 73 of the Indian Contract.

(39) Section 56 of the Indian Sale of Goods Act, 1930, provides for damages foe non-acceptance. It runs as follows :- 'Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for nonacceptance'.

(40) Section 73 of the Indian Contract Act, 1872. provides for compensation for loss or damage caused by breach of contract. The relevant portion of Section 73 and illustration '(c)' thereof are as follows : -

'73.When the contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such bieach, or which the parties had in view, when they made the contract, to be likely to result from the breach of it. x x xxx x x Xxx Explanationn :-In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account. Illustrations x x xxx x x xxx (c) A contracts to pay B at a stated price, 50 maunds of rice, no time being fixed for delivery. A afterwards informs B that he will nto accept the rice if tendered to him. B is entitled to receive from A, by way of compensation, the amount, if any, by which the contract price exceeds that which B can obtain for the rise at the time when A informs B that he will nto accept it'.

(41) After referring to the said sections and illustration, and after pointing out that the respondent Government did nto inspect the goods and thereby refused to perform their own part of the contract, i. e. refused to accept the remaining quantity of goods due under the contract, the learned Subordinate Judge observed that the seller is only entitled by way of compensation to the amount by which the contract price exceeds that which can be obtained by the seller at the time of its re-sale in the market, that if the seller tenders for acceptance a large quantity of goods and the same is nto accepted by the buyer, the buyer is nto liable to pay damages by way of compensation for the whole of the quantity tendered for inspection and acceptance, but is liable to pay damages by way of compensation only with respect to the quantity which remained due under the contract.

(42) The learned Subordinate Judge then expressed his view that in the present case the Umpire allowed the damages by way of compensation of the whole quantity tendered but nto accepted, which was far in excess of the quantity that remained due, and thus committed an error of law apparent on the face of the award. The legal propositions set out by the learned Subordinate Judge on the basis of the provisions in Section 56 of the Indian Sale of Goods Act and Section 73 of the Indian Contract Act and illustration '(c)' thereto, are no doubt correctly stated. But, the first part of his view that the Umpire fixed the damages taking into consideration the entire inspected and accepted, is obviously based on his view that the same was apparent from the findings of the Umpire. We have already discussed the same and pointed out that it was nto apparent from the said findings.

(43) The second part of his view that the appellants tendered a large quantity of timber far in excess of the quantity that remained due, ignores the case of the appellants that though they were bound to supply only about 42,185 eft. that remained due, they had to offer 46.000 eft. for inspection on 14-2-1957, because the first un-inspected lto of 43,085.52 eft. which was lying for inspection since 11th January, 1956, had deteriorated on account of long storage and in fact had to be subsequently sawn into slantlings and sold for a low price. If this Explanationn is accepted, the view of the learned Subordinate Judge that the appellants tendered a large quantity far in excess of the quantity that was due would lose its force. The said Explanationn of the appellants might have been taken into consideration by the Umpire. In any case, it was nto open to the Court to go into these aspects when the Umpire did nto expressly state what considerations weighed with him and for what reasons, he fixed the lump-sum as damages. We are, thereforee, of the opinion that the reasoning of the learned Subordinate Judge based on Section 56 of the Sale of Goods Act and Section 73 of the Contract Act is erroneous.

(44) It is further contended by Mr. Sen that the learned Subordinate Judge was nto right in his view that damages , beawarded only under Section 56 of the Sale of Goods Act and Section 73 of the Contract Act, and that under Section 55 of the Contract also, if it was nto the intention of the parties that time should be of the essence of the contract, the appellants would be entitled to ask for compensation for the loss caused to them by the breach of contract committed by the respondent-Government. The relevant portion of Section 55 of the Contract Act relied upon by Mr. Sen is as follows :-

'55.xxx x If it was nto the intention of the parties that time should be of the essence of the contract, the contract does nto become voidable by the failure to do such thing at or before the specified time ; but the promiseis entitled to compensation from the promisor for any loss occasioned to him by such failure. If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promiseaccepts performance of such promise at any time toher than that agreed, the promisecan nto claim compensation for any loss occasioned by the non-performance of the promiseat the time agreed, unless, at the time of such acceptance he gives ntoice to the promisor of his intention to do so'.

(45) The argument of Mr. Sen is that when the respondent-Government purported to grant an extension of time by their letter, Ex. C/7 dated 1st September, 1956, the appellants sent a telegram, Ex. C. W. 6/3 dated 16th September, 1956, in which they made it clear that the legal rights of the appellants would nto be prejudiced by the agreement to extend the date of delivery, and that since the appellants thus reserved their rights to claim compensation within the meaning of the last part of Section 55, it is open to the appellants to ask for compensation for the loss occasioned by the non-performance of the promise on the part of the respondent-Government. In answer to this argument, Mr. Parkash Narayan, learned counsel for the respondent pointed out that the appellants did nto base their case before the Umpire on Section 55 of the Contract Act, and that even toherwise the letter, X. C/3 dated 15th April, 1957, whereby the appellants sought for the last or final extension of time, was unqualified and unconditional and there was no reservation of their rights in the said letter. We consider that it is nto necessary to go into this argument based on Section 55 of the Contract Act in the view we have taken as regards the reasoning of the learned Subordinate Judge based on Section 56 of the Indian Sale of Goods Act and Section 73 of the Contract Act.

(46) As regards the first contention of Mr. Sen that there was no error apparent on the face of the award, Mr. Parkash Narayan, the learned Advocate for the-respondent-Government drew our attention to Ex. C. W. 5/1. It is said to be a statement filed by the appellants before the Umpire showing the loss incurred by the firm (appellants) for sale of 43,056.56 eft. of stores against A/T No. ST/11/21684-D/1868/3R dated 26th December, 1953. The learned counsel for the respondent sought to rely upon this statement and show that the appellants claimed compensation belore the Umpire only for 43,056-52 cft., while the Umpire took the entire quantity of about 86,000 eft. which remained un-inspected. He contended that while the appellants claimed compensation for a smaller quantity of timber, the umpire gave compensation for a larger quantity, and there was thus an error apparent on the face of the award. C. W. 5, the Accountant of the 1st appellant-company deposed before the Umpire that he was asked to prepare a chart by the appellants of the expenses for the period 21-6-1956 to 6-10-1956 and 14-2-1957 to 31-8-1957, and that the chart, Ex. C. W. 5/1 was prepared by him on the basis of the ledger of the appellant-company. Mr. B. Sen, learned counsel for the appellants, contended that the said statement Ex. C. W. 5/1 was only intended to show the expenses incurred by the appellant- company during the aforesaid periods, that it was never intended to show the entire claim of the appellants. We do nto find anything in the said statement or in the evidence ofC. W. 5 to show that the appellants intended the said statement to show their entire claim for compensation before the Umpire. We, thereforee,, consider that the respondent-Government cannto rely upon this statement for the purpose of showing that there was an error apparent on the face of the award.

(47) Mr. Parkash Narayan, learned counsel for the respondent- Government referred us to the decision in Durga Prasad Chamriya v. Anardevi Sethani. But, in that decision it was held that where the mtoion is to set aside an award for the matter appearing on its face, the Court is debarred from considering any matter which does nto appear in the award itself or in documents incorporated in it, and that where an award has referred to certain documents and after construing them has arrived at certain conclusions, the documents can be said to have been incorporated in the award. The said decision cannto be of any help to the respondent-Government as the award in the present case did nto refer to Ex. C. W. 5/1.

(48) Mr. Parkash Narayan next contended that in the case of a breach of a contract for the sale of goods, the measure of damages is the difference between the contract price and the market price at the date of the breach,and in the present case,the Umpire proceeded on a wrong basis as the Umpire did nto adhere to the said principle. He relied upon the decision in Bijoy Singh v. Bilasroy & Company. In that decision it was held that upon a breach of a contract for the sale of goods, the measure of damages is the difference between the contract price and the market price at the date of the breach, that unless there is an extension of the due date, the Arbitrators cannto award damages on the basis of the rate prevailing at a later date, and that if the Arbitrators have given damages on a wrong basis, the award is had on the face of it. In that case, the learned Judges found that on the face of the award it was clear that the Arbitrators awarded damages on the basis of the rate on a certain date and held that that was a wrong basis, and thereforee set aside the award. This decision also does nto help the respondent- Government, as in the present case the basis of the amount of damages awarded by the Umpire is nto apparent on the face of the award.

(49) Coming now to the second contention of Mr. Sen, we think that this is partly covered by our discussion on the first contention. The argument of Mr. Sen is that the learned Subordinate Judge erred in relying on the decision in Union of India v. Bakshi Ram, and proceeded to find out the break-up of the lump-sum damages awarded by the Umpire, even though the Umpire did nto specify the basis or the criterion on which he fixed the amount of damages. As already stated earlier in this judgment, the learned Subordinate Judge, after refering to the decision in Union of India v. Bakshi Ram, went into the question as to the basis or creterion on which the Umpire fixed the damages at Rs. 3, 10, 000.00, and held that the Umpire took into consideration buth the quantities referred to in issues 4 and 5 in fixing the amount of damages.

(50) As already pointed out, the Umpire just recorded his findings on each of the issues Nos. 4 and 5. On issue No 6, he merely stated his finding that the appellants herein (claimants) were entitled to recover Rs. 3,10,000 as damages from the respondant. He did nto state the reasons or the grounds or the basis or the criterion on which he arrived at the amount of Rs. 3,10,000.00 In toher words, he awarded a lump-sum as damages. An Umpire or Arbitrator could give a lump-sum award as laid down in the unreported decision of the Supreme Court in Firm Madan Lal Roshan Lal Mahajan v. The Hukamchand Mills Ltd. Indore, dated 19th August, 1964, in Civil Appeal No. 878 of 1964. We may also refer to the observation of a Division Bench of the High Court of Madras in the Union of India v. Mangal Dass N. Verma, which is as under :-

'NORcan the validity of the award be impugned on the ground that each item of claim or counter-claim was nto specifically dealt with and the Umpire's decision thereon recorded. An award of a lump-sum is nto invalid and the sum awarded must on the facts of the present case be taken to reflect the net result of the claims up held or disallowed'.

(51) It is thus well-settled that an Arbitrator could award a lump-sum as damages. But, the question is whether in a case where the Umpire made a lump.sum award without staling the reasons or ground is or basis or criterion for the amount fixed by him, it is open to the Court to find out from extrinsic evidence the possible or probable basis or criterion for the lump-sum fixed by the Umpire. The learned Subordinate Judge, as already stated, held that the Umpire, instead of taking into consideration only the quantity that remained due, took into consideration the entire quantity and fixed the amount of damages. This was really a probe on the part of the learned Subordinate Judge into the mental process by which the Umpire arrived at the amount fixed by him. As already pointed out by us, this was just what was held to be illegal in the decision of the Supreme Court in Juvarajbhoi Ujamshail v. Chintamanrao Balaji. The learned Subordinate Judge relied upon the decesion of the High Court of Punjab (Bishan Narain, J.) in the Union of India v. Bakshi Ram. In that case, the claim of a contractor related to 3 items for which he claimed Rs. 30,000, Rs. 14,000 and Rs. 20,000 respectively. The Umpire awarded a lump-sum of Rs. 54,000 without staling how he arrived at that amount. The case of the Government was that the Umpire rejected claim (b) and awarded Rs. 54,000 under claims (a) and (c), which meant that the Umpire awarded more than what was claimed under claims (a) and (c). On the toher hand, the case of the contractor was that he claimed a sum of Rs. 64,000 in all, and that the Umpire reduced the amount and awarded a lump-sum of Rs. 54,000 The learned Judge of the High Court, on a consideration of the operative portion of the award, held that claim (b) was nto specifically mentioned in the said operative portion and that it should, thereforee, be considered to have been rejected by the Umpire. On that conclusion, it would follow that the Umpire awarded Rs. 54,000 which was much more than the claims (a) and (c) But, having regard to the case of the contractor that the sum of Rs. 54,000 was awarded under all the three claims, it was argued in the alternative on behalf of the Government that even if that was so, the claim (b) related to a matter which was nto covered by the Arbitration Agreement and the Umpire could nto adjudicate upon that claim as it was beyond the scope of reference. The learned Judge accepted the said contention also, and held that the Umpire had no jurisdiction to adjudicate upon the claim covered by claim (b). It was in that context that the learned Judge observed as follows:-

'IT is well established that if a lump-sum be awarded by an Arbitrator, and it apears on the face of the award or be proved by extrinsic evidence that in arriving at the lump-sum, matters were taken into account which the Arbitrator had no jurisdiction to consider. the award is had (Falkingham v. Victorian Railway Commissioner'). On this argument of the respondent (contractor), thereforee, it is clear that the Umpire, in fact, exceeded his jurisdiction and, thereforee, this award cannto be made a rule of the Court as he has taken into consideration the claim (b)'.

Thus, on either basis, namely, on the basis that claim (b) was disallowed by the Umpire or on the basis that claim (b) was taken into consideration by the Umpire, the award was liable to be set aside. The learned counsel for the Government placed reliance upon the words 'or be proved by extrinsic evidence' in the passage extracted above, and contended that where a lump-sum wa.s awarded by the Arbitrator, it is open to go into extrinsic evidence to find out the basis or the criterion for the amount fixed by the Umpire. This contention cannto be accepted in view of the clear decisions of the Supreme Court referred to above, which are binding upon us.

(52) In the aforesaid decision in Union of India v. Bakshi Ram', there was antoher contention regarding claim (c) which related to 'loss of profits'. The learned Judge (Bishan Narain, J.) referred to this claim and observed that it was nto clear what that term meant, that it was possible to come to the conclusion that the term meant the difference between the market price on which the goods were purchased by the claimant and the contract price at which they agreed to supply them to the Government, and if that be so, then it was nto understood how the claimants were entitled to receive the amount mentioned in claim (a) which was an advance made by the claimants to their suppliers, and that the learned Judge did nto know,ofany provision of law under which that clain can be allowed as damages for breach of the contract, in that context, the lerned Judge observed as follows:-

'WHILEit is nto necessary for an arbitrator to give recsons for his conclusions or to give separate findings on each and every issue , involved in the dispute, but I am definitely of the opinion that every party that appoints an arbitrator has a right to expect an intelligible decision which determines the rights of the parties on the various important points which are at issue. I think that if it is nto done by the Arbitrator, then his award should nto be allowed to stand. If this test is applied to the present case, then the award cannto be made a rule of the Court and must be set aside''

(53) The learned counsel for the respondent-Government relied upon this passage and contended that the lump-sum awarded by the Umpire in the present case was unintelligible and, thereforee, the award must be set aside. The observation of the learned Judge applies to a case where the decision or conclusion of the Arbitrator was nto intelligible at all. In that particular case, the learned Judge held that claims (a) and (c) ware included in the amount awarded by the Umpire. Aftercoming to that conclusion, the learned Judge took the view that it was nto understood how claim (a) could be allowed to the claimants in that case. Thus, the learned Judge came to the conclusion that the inclusion of claim (a) by the Umpire was unintelligible. The question as to whether the decision of an Umpire is intelligible or nto depends on the fats of the particular case. In the persent case, the finding of the Umpire on issue No. 6 was that the appellants (claimants) were entitled to recover a sum of Rs. 3,10,000.00 as damages from the respondent. He thus made a lumpsum award. There is ntohing unintelligible about it. Law permits such a lump-sum award. The contentions of the learned counsel for the respondent-Government based on the observations in the judgment in the Union of India v. Bakshi Ram' cannto, thereforee, be accepted.

(54) We may add that during the arguments before us, it was found that a Letters Patent Appeal No. 11-D of 1957 was filed against the judgment of the learned Single Judge Bishan Narain, J., and that the said appeal was dismissed by a Division Bench of the High Court of Punjab on 1st March, 1961, we have perused a copy of the said appellate judgment. The learned Judges affirmed the finding of the learned Single Judge that the Umpire rejected the claim (b) and awardedasum in excess of claims (a) and (c) taken together, and thereforeeheld that the award was liable to be set aside. Neither of the counsel of the parties before us relied upon any passage in the said appellate judgment. It is, thereforee, nto necessary to refer to it in detail.

(55) We, thereforee, accept the contentions on behalf of the appellents and hold that there was no apparent error of law on the face of the award, and that it is nto vitiated by the fact that the Umpire gave a lump-sum as damages without specifying the basis or the criterion on which he fixed the side lump-sum of damages.

(56) For the above reasons, we allow the appeal set aside the judgmentand the decree of the learned Subordinate Judge, First Class Delhi, dated 12-4-1962, and decree the suit No. 44 of 1961 on the file of the Court of the Subordinate Judge, 1st Class, Delhi, in favor of the 2nd appellant, to the award, dated 20-11-1960, made bythe Umpire Anand Behari Lal. We further order under Section 29 of the Indian Arbitration Act, interest at 4% per annum on the amounts of Rs. 3,10,000.00and Rs. 6,500.00 adjudged by the said award and confirmed by our decree, from this date till realisation. The 2nd appellant is entitled to his costs in this Court and in the lower Court. The objection petition filed by the Respondent 1n the lower Court under Section 30 and 33 of the Arbitration Act is dismissed, but without costs.


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